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Gig economy workers delivered a blow – the impact of the Full Bench’s Deliveroo decision

Submitted by Firm:
Maddocks
Firm Contacts:
Bruce Heddle, Michael Nicolazzo
Article Type:
Legal Update
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The recent Deliveroo decision emphasises the importance for organisations to accurately characterise worker engagements in comprehensive, written contracts.

A Full Bench of the Fair Work Commission has delivered an important decision, finding that a Deliveroo delivery rider – Diego Franco – was an independent contractor, and not an employee of Deliveroo.

In overturning an earlier decision that said Mr Franco was an employee, the Full Bench applied the reasoning in two recent High Court decisions and reiterated that the terms in a written, comprehensive contract, rather than post-contractual conduct, will determine whether someone is an employee or independent contractor.

What happened to Mr Franco?

Mr Franco worked for Deliveroo as a delivery rider – as well as working for other delivery platforms in Uber Eats and Door Dash. Mr Franco signed several ‘supplier agreements’ throughout his 3 years working with Deliveroo. In April 2020, Deliveroo identified Mr Franco as a delivery rider with delayed delivery times. Deliveroo then sent him an email, advising him that the delays breached his ‘suppler agreement’ and terminated the agreement.

Mr Franco lodged an unfair dismissal application against Deliveroo. At first instance, Commissioner Cambridge found that:

  • Mr Franco was employed by Deliveroo. He was not an independent contractor. Mr Franco was therefore protected from unfair dismissal;
  • Mr Franco was unfairly dismissed; and
  • Mr Franco should be reinstated and paid back pay.

Deliveroo appealed Commissioner Cambridge’s decision to the Full Bench, which handed down its decision on 17 August 2022 (Deliveroo Australia Pty Ltd v Diego Franco [2022] FWCFB 156).

What did the Full Bench decide on appeal?

Based on the latest “supplier agreement” Mr Franco signed, the Full Bench decided that Mr Franco was not an employee; rather he was an independent contractor. The Full Bench came to this conclusion because the relationship was governed by a comprehensive, written agreement that had several features that demonstrated that Mr Franco was an independent contractor, including that the agreement:

  • showed Deliveroo’s lack of control over how Mr Franco performed the deliveries that he agreed to make (it was up to Mr Franco to determine how he performed the work - including what ‘safe and efficient’ delivery route to take and what vehicle he would use to make the delivery)
  • recorded that Deliveroo could not require Mr Franco to perform any particular delivery – Mr Franco had the right to “unassign” himself from an order even if he had earlier accepted the order
  • required Mr Franco to provide a vehicle to make deliveries at his own expense
  • did not require Mr Franco’s personal service, as he could arrange, without Deliveroo’s prior approval, for someone else to make his deliverie
  • required Mr Franco to pay an “administrative fee” for the cost of accessing Deliveroo’s software and for Deliveroo providing invoices and other administrative services.

As the Full Bench found Mr Franco was not an employee, Mr Franco was not protected from unfair dismissal.

Why did the Fair Work Commission change its mind?

The Full Bench did say that Commissioner Cambridge’s initial decision was ‘correct’ given the law at the time but recent High Court cases led the Full Bench to reverse that decision and find that Mr Franco was an independent contractor.

Deliveroo’s appeal was put on hold pending the High Court decisions in CFMMEU v Personnel Contracting and ZG Operations v Jamsek. As explained in a previous article, those decisions changed the law. Whether an individual is an employee or independent contractor is now to be almost exclusively answered by reference to the terms of the written contract made between the parties. When the nature of an engagement is comprehensively contained in that written contract, the 'substance and reality' of the working relationship and how the parties later interact is irrelevant. It is only when the written contract is less than comprehensive that the parties’ working relationship and interactions may come into play in deciding the true nature of that working relationship.

After these cases were decided in the High Court, the appeal resumed and the Full Bench found that the terms of Mr Franco’s supplier agreement with Deliveroo rendered him an independent contractor. Interestingly, had the High Court decisions not been made, the Full Bench stated that it would have found that Mr Franco was an employee of Deliveroo by reference to the reality of the relationship between the parties.

What are the key takeaways from this decision?

This case serves as an important reminder that:

1. Drafting is critical: organisations need to clearly record the terms and conditions of an engagement in a comprehensive written contract which identifies whether an individual is an employee or an independent contractor, and includes terms appropriate for a contracting relationship. If this is done, it no longer matters how the parties interact after the contract is signed.

2. A job label is insufficient: attaching a superficial label to the relationship as one of an 'independent contractor' – and imposing tax and insurance obligations on an individual because of that label – will be insufficient if the agreement contains terms which are characteristic of an employment relationship.

3. If there is a less than comprehensive contract, the ‘totality of the relationship’ matters: How the parties interact with each other will determine the relationship if a contract is less than comprehensive, or is ineffective or a sham. This creates uncertainly for organisations who do not have comprehensive contracts in place, with the potential for disputes, liability for employee entitlements and prosecution.

4. If you are intending to engage an independent contractor: ensure the contract minimises the level of control and direction that you have over the provision of the worker’s services. You could do this by, for example, including terms that:

  • Allow discretion as to how services are provided
  • Require the worker to purchase specific equipment to provide the services
  • Do not require personal service
  • Require payment of fees to use systems and access administrative services

5. Watch this space: the Full Bench’s decision will give greater momentum to calls for the Federal Government to take steps to introduce greater regulation and protections for workers in the gig economy and independent contractors more generally – to address what even the Full Bench itself described as the unfair treatment of Mr Franco.

Next steps

The need for clearly articulated and well-drafted contracts has never been greater in light of this decision. Contact our Employment, Safety & People Team for assistance in drafting employment and contractor agreements.

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